Tax Extension Due Dates and Penalties

If you are unable to prepare and file your federal income tax forms by the April 15th due date for the previous tax year, avoid paying a penalty by filing for a tax extension.  Internal Revenue Service form 4868, “Application for Automatic Extension of Time to File U. S. Individual Income Tax Return” can be obtained, completed and filed by the April 15th deadline.   This allows you a tax extension until October 15th of the same year in order to complete and file a return.  If you are living overseas, the tax extension is through June 15th of the same year.

In the absence of the Application for Automatic Extension of Time to File U. S. Individual Income Tax Return (Tax Form 4868), interest will accrue at the rate of 5% per month on the unpaid taxes due up to a maximum of 25%.  With an approved tax extension, this penalty is reduced to 0.5% per month and provided you make an estimated payment at the time you file for the tax extension, the interest is accrued only on the amount that you owe and remains unpaid. If you opt to pay any estimated taxes due with a credit card, a 1.95% surcharge will be added.  Estimating your taxes for the previous year (if you are self-employed and there has been no significant change to your income over the previous year and your family status, including dependents, remains the same) estimate the same amount of income taxes as the previous year when filling out the Tax Extension Form.

For hourly and salaried employees, provided there are no significant changes in your dependents and income, estimate your taxes based on the previous year and review your W-2 Tax Form(s) to determine what has already been paid.  Use these figures when completing your Tax Extension Form. There are two types of penalties assessed if you do not file properly for a tax extension:

1)    The first is the Failure to File Penalty ? assessed at 5% per month, up to 25% maximum on the amount of income tax due

2)    The second is the Failure to Pay Penalty ? assessed at 0.5% per month, on the unpaid balance of the income tax you owe.

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Whether or not you are able to pay by the due date, whether you file a tax extension of not, it is still important that you file your income tax return as soon as possible.  It is a clear indicator to the Internal Revenue Service that you acknowledge that you owe the income taxes and are working towards paying what is due.

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